CHENG YING HUNG t/a PO SHING CO. v. YUEN CHAK CONSTRUCTION CO. LTD

HCA411/2001

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO.411 OF 2001

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REASONS FOR JUDGMENT

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1. In this action I gave judgment in favour of the plaintiff in the sum of $928,397.85 with interest and costs, and dismissed the defendant's counterclaim. The defendant has appealed, and sought a stay of execution pending appeal. I dismissed the defendant's summons with costs of and occasioned by the application to the plaintiff, to be taxed if not agreed. I now give my reasons for so doing.

2. The defendant's grounds for the stay are that if the judgment is enforced before the appeal, it will suffer additional hardship, is likely to be forced out of business and would suffer loss which could not be compensated by damages should the appeal succeed. If the judgment is enforced, the defendant's 38 employees would lose their jobs. There is a genuine dispute between the parties which forms the subject matter of appeal. A successful appeal would be rendered nugatory by the enforcement of the judgment before the appeal is heard.

3. In brief, the plaintiff argues that the defendant must show at least an arguable appeal, and has not done so. In this case the decision turned primarily on questions of fact which were determined by the quality of the evidence adduced by the parties. The grounds of appeal deal essentially with findings of fact. The Court of Appeal will not disturb such findings unless it can be shown that the trial judge's conclusion is plainly wrong. In other words the appellant bears a heavy burden, in an appeal on questions of fact.

4. The plaintiff further argues that, on the basis of the accounts exhibited by the defendant, the proposition that the appeal will be rendered nugatory by prior enforcement is simply incredible. The defendant has plenty of money; the plaintiff points to the value of the defendant's assets in 2002 of some $11.7 million and in 2003 of some $9.8 million and its turnover in those years of $36.6 million and $33.9 million respectively. Part of the assets in 2002 were cash at bank of $2.69 million though in 2003 that has apparently turned into an overdraft of $89,000.00.

5. The plaintiff further points to the fact that the defendant has various pending cases against it and says that its financial stability is in doubt. This is advanced in support of the argument of prejudice to the plaintiff, if it is kept out of its money. There is some inconsistency between this and the contention that the defendant is a thriving business and so should be able to pay. It seems that there are now only five cases pending and not the 13 mentioned in the plaintiff's affirmation.

6. The principles governing the granting of a stay of execution pending appeal are set out in the Hong Kong Civil Procedure at Paragraph 59/13/1, and extensively by Ma J (as he then was) in Star Play Development Ltd v. Bess Fashion Management Co. Ltd, HCA4726/2001, 7 June 2002, and again in Wenden Engineering Service Co. Ltd v. Lee Shing Yue Construction Co. Ltd, HCCT90/1999, 17 July 2002. In the interests of brevity I will not reproduce them here.

7. I will not say that the defendant does not have a bona fide or an arguable appeal. The appeal is mainly on questions of fact, and therefore a difficult one on those questions but I accept that they are not the only questions. I will not be so bold as to say that the appeal is unlikely to succeed but at the same time it cannot be said, and I do not think it is really suggested, that the grounds are so strong as to justify a stay on their own.

8. The real question here is whether a successful appeal will be rendered nugatory if the judgment is enforced before the appeal is heard. There is no evidence to suggest that, if the appeal is successful, the plaintiff will be unable to repay what it has recovered. What is relied on is the evidence of the defendant's director, Mr Ho, that enforcement of the judgment will force the defendant into liquidation. It is argued that that evidence should be accepted as it is unchallenged.

9. The judgment sum here is less than $1 million. Mr Ho's evidence may be unchallenged but it simply does not accord with the defendant's own accounts. It appears to be quite a successful business with a large turnover and adequate assets. Granted that $9.8 million worth of assets does not necessarily mean that $900,000.00 of cash is available, it should be possible to borrow on the strength of them and there is no evidence that such a figure could not be borrowed. It is for the defendant to satisfy the court that good reason for the stay exists. I find myself in the same position as Ma J in Wenden of asking rhetorically, if the defendant's shareholders or bankers were not prepared to support it, why should the court?

10. There is also the fact of the large number of disputes in which the defendant has been involved. There were no less than 13, though apparently now, according to the latest affirmation, only five court actions are in progress. This suggests at least that the defendant sails near the wind in its dealings with others. The defendant has weathered these various disputes so far, and it is difficult to see it being driven into litigation by this judgment.

11. I am, therefore, not satisfied that the defendant has shown good cause for stay of execution pending the appeal.

12. I turn to the question of costs. Mr Bell for the defendant relies on paragraph 59/13/8 of the Hong Kong Civil Procedure which suggests that costs should be in the cause of the appeal. Mr Khaw for the plaintiff argues that this may be appropriate where stay is allowed but not where it is refused; even if the appeal is allowed it does not necessarily mean that a stay should have been allowed. He also points to the fact that in the Star Play, Wenden and other cases cited, the court in dismissing the application for stay awarded costs against the applicant.

13. I think this latter approach must be right. This is not a case where the merits of the case particularly affect the question of stay. What matters is whether enforcement of the judgment is likely to drive the defendant into liquidation and so render a successful appeal nugatory. I have found that there is insufficient evidence to support this. I do not see why the defendant should not pay the costs of and occasioned by the application.